Novelis Inc., the world leader in aluminum rolling and recycling, today reported net income attributable to its common shareholder of $121 million for the third quarter of fiscal year 2018, compared to $63 million in the prior year period. Excluding tax-affected special items in both years, the company reported net income of $138 million in the third quarter of fiscal 2018, more than double the $67 million reported in the third quarter of fiscal 2017.
The increase in net income, excluding special items, is mainly due to a 20 percent increase in Adjusted EBITDA over the prior year to a record $305 million in the third quarter of fiscal 2018. This increase reflects higher shipments and the company’s strategy to deliver a more favorable product mix with higher automotive shipments and increased operational efficiencies. Adjusted EBITDA reached $383 per ton in the quarter.
Net sales increased 33 percent over the prior year to $3.1 billion for the third quarter of fiscal 2018, driven by higher average aluminum prices, higher total shipments, and a favorable impact from the strategic portfolio shift to higher conversion premium products. Shipments of flat rolled products increased six percent to 796 kilotonnes. Automotive sheet shipments increased 12 percent year-over-year, as production has continued to successfully ramp to meet strong customer demand.
“Aluminum is increasingly the material of choice for our customers. Following another quarter of record-setting financial results, we are making strategic investments to grow with our customers and advance the continued penetration of aluminum sheet in the broad automotive market of competing materials,” said Steve Fisher, President and CEO of Novelis. “These investments, coupled with the most advanced manufacturing processes and largest footprint in the industry, solidify our global leadership position and strengthen our diverse portfolio of lightweight, high-strength aluminum solutions.”
The company recently announced plans to expand its production footprint in the US with an approximately $300 million investment in automotive finishing capacity in Guthrie, Kentucky. Novelis also has agreed to acquire operating facilities and manufacturing assets for €200 million at its Sierre, Switzerland, plant that have historically been leased.
The company reported free cash flow of $79 million for the third quarter of fiscal 2018, including $54 million of capital expenditures. Year-to-date free cash flow has improved $74 million over the prior year, primarily a result of higher Adjusted EBITDA, lower cash interest payments due to refinancing savings and lower metal price lag, partially offset by higher taxes and working capital requirements due to rising aluminum prices.
“Record Adjusted EBITDA for the second consecutive quarter has put us on track to achieve record free cash flow this fiscal year, and is providing the financial flexibility to reduce net debt and seek strategic investments, particularly in the growing automotive segment,” said Devinder Ahuja, Senior Vice President and Chief Financial Officer for Novelis.
As of December 31, 2017, the company reported a strong liquidity position of $1,724 million.
U.S. Tax Cuts and Jobs Act of 2017
During the third quarter of fiscal 2018, the company recorded a net $18 million non-cash income tax benefit for the remeasurement of deferred tax assets and liabilities in accordance with the recently enacted US tax reform. The tax benefit attributable to the common shareholder is $34 million, as $16 million of tax expense is attributable to non-controlling interest related to Logan Aluminum as reflected in the net loss attributable to noncontrolling interests in our financial statements. Other provisions of the Act are not expected to have a material impact on fiscal year 2018.
Full Year Fiscal 2018 Guidance
The company expects to be on the upper end of its previously guided fiscal 2018 Adjusted EBITDA range of $1,150-$1,200 million. Fiscal 2018 free cash flow is expected to be on the lower end of its previously guided range of $400-450 million, driven by the impact of higher aluminum prices. The recently announced automotive investments in the US and Switzerland will not impact fiscal 2018 free cash flow.
Third Quarter of Fiscal Year 2018 Earnings Conference Call
Novelis will discuss its third quarter of fiscal year 2018 results via a live webcast and conference call for investors at 8:30 a.m. ET on Thursday, February 1, 2018. To view slides and listen only, visit the web at https://cc.callinfo.com/r/1ltp4eeb1fnqp&eom. To join by telephone, dial toll-free in North America at 800 928 9281, India toll-free at 18002660843 or the international toll line at +1 212 231 2920. Presentation materials and access information may also be found at novelis.com/investors.
